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China Stocks Buck Headwinds

Fitful follow-through buying continued today for Chinese investors and local stocks in Hong Kong after short-covering helped turn sizable losses into modest gains Wednesday, all in anemic turnover.

The cautious and limited moves reflect what Howard Gorges, vice chairman of South China Brokerage, calls a “professionals’ market.” Traders and fund managers are putting money in Chinese stocks after the market falls, then taking profits when stocks rise a bit, without real conviction any rally or correction will last.

Big foreign investors are cautious, Gorges told Equities. They like the prospects for Chinese currency, RMB, appreciation but for the short term they are not positive about Hong Kong and China.

Investors should get used to subdued trading of Chinese stocks in Hong Kong, according to Gorges. He said problems holding up the market – such as Chinese inflation, European debt and slow U.S. growth – will not disappear overnight.

“There are plenty of headwinds,” he said, “and it’s going to take time for them to go away.” End

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